IBM buys Red Hat in $34 billion deal

IBM announced this afternoon that it will acquire open-source software company Red Hat for $34 billion. The companies called the deal, which still needs approval from shareholders and regulators, the "most significant tech acquisition of 2018." The deal is expected to close in the second half of 2019.

IBM and Red Hat have had a partnership in place for 20 years, spanning everything from reselling and supporting Red Hat Enterprise Linux to collaboratively working on open source projects such as Kubernetes.

IBM officials said they expect Red Hat to significantly bolster IBM's hybrid cloud business, which already generates $19 billion a year in revenues. IBM noted that about 80 percent of application workloads have yet to move to the cloud.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," Ginni Rometty, IBM chairman, president and chief executive officer said in a statement. "This is the next chapter of the cloud."

IBM buying Red Hat means that it will start providing technology to its biggest competitors, including Amazon, Microsoft and Google. Red Hat partners with all of them, and IBM said it will continue the partnerships after the acquisition and work to expand on them.

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